US watchdogs may still get ‘Volcker rule’-consultant

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FRANKFURT, April 12 (Reuters) – U.S. banking supervisors could get indirect powers to ban proprietary trading by banks even if the “Volcker rule” is not in the financial reform bill, a banking consultant with close contact to decision-makers said.
White House economic adviser Paul Volcker has said he hoped some form of proprietary trading ban is included in a final draft of a financial reform bill the Obama administration is urging Congress to pass to tighten bank and capital market oversight. [ID:nN06238725]
Banks do not want the Volcker rule included in the bill, saying it would restrict their ability to make profits.
“The latest idea is that the Volcker rule will be delegated to the relevant supervisory authorities,” said Geoffrey Bell, executive secretary of the Group of Thirty, an informal forum of some of the world’s top economic and monetary policymakers, including Volcker.
“It will be in the bill, through an indirect approach through the regulators,” Bell said on Monday.
Regulators such as the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corp would have the power to impose a ban on proprietary trading if they wished to do so, Bell told a briefing of journalists.
Bell said it was still unclear what would be the final form of the Volcker rule, which would also ban banks from the hedge fund business and limit their future growth.
“If there is another banking crisis tomorrow … it might reaffirm the more restrictive approach,” he said.
The U.S. House of Representatives passed a financial reform bill last year that does not include an explicit ban, while a Senate version also lacks an outright ban on proprietary trading but instead instructs regulators to study the issue.
Volcker, a former Federal Reserve chairman, said last week he thought a bill could be ready for President Obama’s signature shortly before or after the Congressional recess in August.
“Volcker (himself) thinks that there may well be some variant of the Volcker rules,” Bell said.
“If it isn’t there directly, it is going to be there indirectly. Of that, I am absolutely certain.” (Reporting by Jonathan Gould; editing by Karen Foster) ((Reuters Messaging: jonathan.gould.reuters.com@reuters.net; +49 69 7565 1242))
Keywords: BANKS/VOLCKERRULE